International taxation is a term that deals with international tax treaties and methods to resolve tax conflicts involving cross- border countries transactions. There are three vital elements of any taxable transaction that includes:
It is a term used to identify the taxpayer who has a tax liability to pay off.
It is a term used to identity the components of the tax liability.
There must be a connecting factor between the State tax authorities and individual/business taxpayer without which a State authority cannot impose its taxing procedures.
A different countries follow different tax procedures binding to its own legal systems and has to define its own connecting factors to compute tax liabilities with respective to tax accounting rules being followed in their countries.
There are two key principles of international taxation are:
A double taxation issues will be in limelight provided that companies have been taxed both in the country of residence and source. The country of residence has the sole rights to exempt a company from double taxation either by:
There are few sources of international taxation that includes:
In spite of globalization, international taxation is gaining a huge importance in the academic world. There are several universities around the world offering various levels of programs in international taxation. The lists of those few institutions are given below:
Focusing on the advancement of international and comparative tax law worldwide.
United States is one of the most industrialized nations in the world. A taxation policy includes:
Current international taxation practices have its own limitations due to globalization and liberalization policies around the world. The challenges include that companies are becoming globalized and taxation polices are within national frontiers unable to address the issues in cross border transactions. There are three ways to respond to this situation like:
Isolation approach - This kind of approach is not feasible in today’s globalised word because no country will be willing to isolate itself from the principles of international taxation and its reforms happening worldwide.
Synchronization approach - In this approach, the government won’t be playing a pivotal role in framing the tax policies in accordance to its social, cultural and economical aspects of its own country because it emphasizes on the common global tax code rule which will be monitored under the supervision of a global tax authority worldwide.
In general, international trade and business environment is rapidly undergoing changes due to globalization and liberalization polices. In order to facilitate easy trade between nations, the country’s international taxation polices should exchange and share experiences on best practices in global tax environment collectively to be successful in today’s competitive business environment.